Reason Foundation

Congress Reaches Compromise on Spectrum Auction

Congress has given the Federal Communcations Commission approval to auction television airwave licenses to wireless service providers, at last opening the way toward relief of growing congestion on current wireless systems.

The authorization was included in the final deal to extend payroll tax cuts.

The spectrum arrangement splits the difference on the goals of separate House and Senate bills. The Senate bill would have given the FCC a free hand to set a wide range of conditions for the auction, including the power to bar incumbents from bidding. The House would have restricted the commission to conducting a straight-up, open auction.

The bill largely preserves the FCC's authority to structure the spectrum auctions—a win for Democrats, who warned that tying the FCC's hands would allow AT&T and Verizon, the largest carriers, to buy up all of the airwave licenses.

Republicans had argued that Congress should prohibit the FCC from picking winners and losers in the auctions. As a compromise, the bill bars the FCC from excluding any one company from bidding, but allows the agency to set conditions to promote a competitive marketplace.

Although almost all parties are praising the compromise, simply because the spectrum is so badly needed, users should be concerned. The current FCC has a taste for managing outcomes and has made no secret of its desire to "incentivize" competition by tilting the auctions in favor of undercaptilized, but politically favored companies.

Perhaps it's fortunate then that the Congressional deal comes just a day after the FCC pulled the plug on Lightsquared's experimental 4G network because of its interference with GPS signals. Lightsquared was just the sort of "competition" FCC Chairman Julius Genachowski aimed to encourage through policy manipulation. Genachowski insisted on rushing a spectrum waiver throughon Lightsquared's behalf before the interference issues were thoroughly examined. Wishful thinking was no match for the laws of math and physics, which at the end of the day, the FCC was forced to yield to. Here's hoping that this humbling experience is remembered come auction time.